Bath & Body Works: A Fragrant Opportunity in New Leadership and Value

Investors, listen up: Bath & Body Works (BBWI) is serving up a rare combination of new leadership magic, strong earnings momentum, and a valuation so compelling it smells like a steal. Let’s break down why this $33 stock is primed to bloom into something far more valuable—especially ahead of its May 29 earnings call.

The CEO Catalyst: Daniel Heaf’s Luxury DNA

Daniel Heaf’s arrival as CEO isn’t just a leadership change—it’s a game-changer. With a track record at Nike and Burberry, Heaf isn’t just another executive; he’s a master of brand reinvention and premiumization. At Burberry, he turned around stagnant sales by sharpening the brand’s luxury image. At Nike, he spearheaded global expansion and digital innovation. Now, he’s taking the reins of a company with $5.6 billion in annual revenue but one that’s been overlooked by the market.

This isn’t just about a fresh face—it’s about unlocking hidden value. Heaf’s focus on fragrance innovation and e-commerce dominance could supercharge growth. With 1,895 stores and a loyal customer base, Bath & Body Works has the infrastructure to scale—if it’s managed with the flair Heaf brings.

Q1 Results: Beating the Stink of Tariffs

Let’s cut to the chase: Bath & Body Works just delivered a smashing Q1.

• EPS of $0.49 crushed the prior year’s $0.38 and beat guidance handily.
• Sales rose 3% year-over-year, hitting $1.424 billion.

This wasn’t a fluke. The company is resilient in the face of 10% tariffs on Chinese imports—a headwind it’s already factoring into its full-year EPS guidance of $3.25–3.60. Even with these costs, management is sticking to its numbers. That’s confidence.

Valuation: A 9.3x P/E? That’s a Scent of Opportunity

Here’s where it gets screamingly attractive.

At today’s price of $33.41, Bath & Body Works trades at a P/E of just 9.3x based on the high end of its 2025 EPS guidance ($3.60). Compare that to its five-year average P/E of 16x, and you’ll see this stock is deeply undervalued.

Add in the 2.37% dividend yield—a rare treat in this sector—and you’ve got a recipe for income and growth. Even if tariffs bite harder, the dividend is a cushion.

Analysts Are Catching the Scent—Goldman’s $49 Target Isn’t a Mistake

Wall Street is waking up. While all analysts rate BBWI a “buy,” Goldman Sachs just hiked its target to $49—a 47% upside from current levels. Why?

1. Heaf’s track record in turning around brands.
2. Tariff resilience proven in Q1.
3. Dividend stability and balance sheet strength (debt-to-equity is a healthy 0.4x).

This isn’t just about today’s results—it’s about long-term positioning. The company’s U.S.-centric supply chain and home fragrance dominance (a $20B+ category) give it a moat few can breach.

The Earnings Call: A Fragrant Turning Point on May 29

Heaf’s first earnings call as CEO is a make-or-break moment. Investors will demand clarity on:
- Tariff mitigation strategies (e.g., reshoring production?).
- Growth levers like new fragrance lines or e-commerce pushes.
- Dividend sustainability amid pressures.

But here’s the kicker: Even if the call is “just okay,” the valuation is so cheap that the stock could pop on modest optimism.

Final Scent Check: Buy Now—Before the Crowd Sniffs This Out

The math is undeniable:
- P/E of 9.3x vs. historical norms.
- $0.20 dividend (paid quarterly) with room to grow.
- Analyst targets averaging $45+ (J.P. Morgan: $47; Wells Fargo: $48).

This isn’t a “wait-and-see” stock. With Heaf’s vision, a beat-and-raise Q1, and a valuation that’s practically begging for a rerating, Bath & Body Works is a buy now.

The only question is: Will you smell the opportunity… or let it pass?

Action: Buy BBWI now at $33.41. Set a target of $45 and a stop below $28.50.

Disclosure: This analysis is for informational purposes only. Always do your own research.